Social Trading Platforms To Invest In 2020
Previously, investment ideas were obtained from investment advisors or found in investor lounges, through stock market programs on television, radio and the Internet, in stock market newspapers, business magazines, stock market newsletters, in the business sections of newspapers and/or in stock market forums.
For some, Trading for All, promoted by Social Trading, is still new.
Like most social media platforms, Social Trading platforms are business models of platform operators, based on the fact that people are sociable beings who like to exchange information. And just as social media platform operators make money from the content and behaviour of their users, social trading platforms do so with people who want to present their investment ideas to others, and with those who want to investigate and possibly invest in this strategy immediately. Since the popularity of social commerce platforms depends on the success (and notoriety) of signal providers, those who use their popularity, publish effective strategies and gain “followers” or encourage investment are rewarded.
Social Trading Definition
According to Wikipedia, social trading is “a form of unregulated investment advice and asset management for private investors”. Others talk about the intelligence of the masses, but this term always reminds me of the millions of flies that are supposed to prove that certain unappetizing foods finally taste good – for me, the intelligence of swarms is not in itself a reason to eat something or to risk my savings for it – not least because timing can play an important role in the stock market.
But it’s actually nice to look over the shoulder of other traders or investors and exchange ideas with them – to find out what strategies they use, what securities they buy in order to implement the strategies they have in mind, what their timing is and how they comment on their decisions. But this was already happening in former stock exchange television programs like 3SAT Stock Exchange and in stock exchange forums and communities like the former AOL stock exchange forums, the stock exchange communities of wallstreet-online.de or formerly bizcity.de.
On social trading platforms it goes further: anyone who wants to can enter the market directly with money and buy securities or conclude contracts.
Anyone who is inspired by other people’s investment ideas on the social trading platforms and integrates them into his normal portfolio in the form of a share purchase or other, can profit from this as an investor, but followers who want to invest in a trader’s strategy directly on the social trading platform cannot buy real shares or funds there, but can only conclude certificates (on Wikifolio) or Contracts for Difference (CFDs – on Ayondo or eToro) that replicate and/or take advantage of a development.
Certificates essentially present an issuer risk (unlike money invested in equity funds, money invested in certificates is not protected against the issuer’s bankruptcy). And CFDs are in any case extremely risky leveraged products that bet on a movement.
It is sometimes said that on social trading platforms, transparency is greater than what the so-called stock exchange gurus tell you in their newsletters. But I am not yet convinced of this, because as far as I know, the prices and spreads on social trading platforms are set outside the regulated market and are not controlled by anyone.
Social trading platform
In this section we present a non-exhaustive list of very popular platforms on the market, find more information about all social trading providers on https://www.droitdunet.fr/
Wikifolio is currently the most popular social commerce platform in our country. Wikifolio has its headquarters in Vienna. According to an interview with founder Andreas Kern published in Social Banking 2.0 at the end of 2013, Wikifolio is owned by him and the investment company of the Handelsblatt publishing group (which owns more than 25% of the company). In addition, the Viennese investment company Speedinvest, several business angels, employees and Lang & Schwarz (the latter with 5%) also hold shares.
Registered users can create a Wikifolio – a kind of model portfolio – and use it to demonstrate their strategy with “virtual money” of their choice. However, this virtual trade does not influence buying and selling prices in the same way as buying and selling prices in the real trade. Furthermore, the choice of securities from which the creator of the Wikifolio can choose is limited to Lang & Schwarz’s over-the-counter market values – these include, but are not limited to, shares, exchange-traded index funds, funds and structured products such as warrants, bonus certificates, direct disposal products and discount certificates. In personal experience, for example, I was unable to map my real private securities account at all because a third of my securities (shares, equity funds and ETFs) were not available on the Wikifolio platform or at Lang & Schwarz.
Traders who publish their Wikifolio and whose successful Wikifolio is then implemented in certificate form by Lang & Schwarz receive 30-50% of what they set as a performance fee for their Wikifolio. The merchant can then request a payment for amounts above EUR 100.
If you wish to invest as a follower in the Wikifolio of a successful merchant on Wikifolio.com, you can purchase a certificate that reflects the performance of the Wikifolio portfolio. Certificates are not investments like shares, the purchase of which makes you a co-owner of a corporation and gives you the corresponding rights. With certificates, there is a possibility of total loss in the event of the issuer’s insolvency (“issuer risk”). As already mentioned, the issuer of the certificates in Wikifolio is always Lang & Schwarz, the stock exchange is the Stuttgart Stock Exchange – you can therefore buy the certificates through any bank or directly from Lang & Schwarz. Some of the Wikifolio certificates are now also offered by direct banks such as S-Broker or Comdirect in the form of savings plans.
The buyers of the certificates pay a performance fee of 5 to 30 % and a certificate fee of almost 1 % per year and, as already mentioned, bear the issuer risk.
Ayondo is part of the investment portfolio of Next Generation Finance Invest AG (NextGFI), a listed investment company based in Zug, Switzerland. Ayondo Markets Limited in London is responsible for trading and order execution, social trading services are provided by Ayondo GmbH, based in Frankfurt. The Ayondo holding company is financially supported by Luminor, a private equity group based in Singapore. There may be other parties involved.
Ayondo is aimed at traders (“particularly active investors”). Contracts for Difference (CFDs) are traded on indices, commodities, currencies, individual stocks – up or down. Traders who are not successful themselves (about 80-95% of traders), can attach themselves to so-called “top” traders (signal generators) and hope that they will not lose their money. As a “follower”, you need to open your own broker account on the Ayondo markets and link it to the trading signals of one or more top traders. The user’s contractual partner at Ayondo Auto Execution is DonauCapital Wertpapier AG in Ruderting.
A top trader receives a commission from Ayondo. Ayondo, Ayondo Markets, DonauCapital Wertpapier AG and the signal provider (the primary trader) are paid from spreads – the differences between purchase and sale prices. Spreads vary depending on the currency, time of day, volatility, etc. In this respect, it is in the interest of all parties involved to have as many trades as possible. However, only the signal generator can exert an influence. It will try to find as many followers as possible and execute as many trades as possible.
CFDs are also traded on eToro*. Signal generators (“popular investors”) receive a fee based on the number of “qualified copiers”. There is a revenue share for each trader recruited and refunds for a portion of their margin. There is a reward system for all merchants for the friends they recruit.